Merriman Podcast transcript
(Release – Study: Chicago Walmart Does Not Boost Employment or Retail Sales;
January 8, 2010)
Lead-in:
This is research news from U-I-C – the University of Illinois at Chicago. Today David
Merriman, head of economics and professor of public administration, talks about a new
study that examined the economic impact of a Walmart store that opened on Chicago's
west side in 2006. Here's Professor Merriman:
Walmart is the largest retailer in the United States and has expanded through most rural
and suburban areas of the United States. Recently, Walmart has expanded into urban
areas. We wanted to study this phenomenon.
The first urban Walmart was in Los Angeles, the second one was announced to be in the
City of Chicago in the Austin neighborhood. It was announced that it would open in
2006.
So a group of researchers working between the University of Illinois at Chicago and
Loyola University (of Chicago) decided that they wanted to do a study of the effect of
this Wal-Mart on the neighborhood in which it was located.
They did that by first doing a baseline study, prior to Walmart's opening, which surveyed
stores in a 4-mile area around the area where the new Walmart would open. Then they
did two subsequent telephone surveys. There are about 300 businesses surveyed by
telephone and they were asked various things – about the number of employees they had,
the kind of wages they paid, who owned the store – that sort of information. Using that
information, we were able to track businesses that closed subsequent to Walmart's
opening.
What we did was look at the pattern of closures around Walmart and tried to determine
whether stores that were more affected by Walmart's competition were more likely to
close – in particular the stores that were closer to Walmart, we would expect to be more
affected by the competition. And we did find a pattern that there were excessive
closures, more than you would expect, closer to Walmart.
Using that data, we calculated the number of jobs that those stores that had excessive
closures would have provided, and we found in totaling that up that it was about 300 jobs
– which is roughly the same amount of jobs that Walmart provides. So, the net effect,
we think, on employment was pretty minimal. Walmart provided some new jobs, but the
stores that closed – because of Walmart – represented a decline in jobs. And looking at
the jobs that were lost, they seemed of similar quality to the jobs that Walmart added.
They were relatively low-paid jobs, many jobs that didn't provide benefits. Most of the
jobs that were lost would have been in small businesses, often family-owned businesses,
or at least a business in which the owner worked in the business.
We also supplemented our own original data collection by looking at data that the state
had collected on sales tax revenues, which is based on retail sales, and also employment,
based on the employment security, or unemployment insurance rolls. And looking at
those data we were able to discern similar patterns. In particular, looking at those data,
we were able to look at the effect of recent economic downturn and whether the recent
economic downturn was really the reason for the excessive closures. And we were able
to determine that even accounting for the slide in the economy, we can discern that
Walmart didn't cause an increase in the net number of jobs – or sales.
If you think about this, it's probably pretty much common sense that if you open a new
business in a neighborhood, people will choose to shop at that business rather than other
businesses, so the total amount of sales isn't going to change very much. This is pretty
well accepted in the economics literature that changes in retail sales are pretty much a
wash.
So we don't thin the opening of Walmart had a big effect on the number of jobs or the
total amount of sales in the neighborhood.
What does this mean? We think what this means is the public policy debate over
Walmart shouldn't be over whether additional jobs are created, but should be about what
kind of neighborhood we want, what kind of retailers do we want to support, and how
much the government should be involved in the management of the economy and the
decisions.
Consumers have chosen to shop at Walmart rather than some other stores. Some people
might think that that's an inappropriate choice in our economy. Other people might think
that it changes the character of the neighborhood by having big-box stores, like Walmart,
and it hurts established businesses. And they might think there should be government
policy to support that. We don't take any position on that view, but we think that's where
the debate should be. Those are the kinds of public policy questions about which people
should be talking.
Close:
David Merriman is professor of economics and public administration.
For more information about this research, go to www.new.uic.edu, click on news releases
and look for the release dated January 8, 2010.
This has been research news from U-I-C – the University of Illinois at Chicago.
-0-